Defending a Frivolous Lawsuit - Breach of Non-Compete, Fiduciary Duty and Tortious Interference

Being served with a lawsuit can be a very frustrating, time-consuming and expensive matter, especially when the lawsuit is frivolous. MarvQuin advise you to always consult an attorney prior to engaging in any steps along the process, however the following letter is a highly recommended first step to dealing with a frivolous lawsuit. The claims covered extensively in the letter are Breach of Non-Compete Agreement, Breach of Fiduciary Duty and Tortious Interference or Intentional Interference with a Business Relationship. Each cause of action is discussed as it pertains to Arizona Law.

When a lawsuit is frivolous, states have many protections in place to deal with and eventually punish those who have instituted the legal proceeding. It is important to confront the situation agressively and think long and hard about how you are going to respond. Once you have collected your thoughts, draft a letter similar to the one below and assess the situation from there. The following letter was written by Marvin Jones of MarvQuin, an experienced corporate attorney in the fields of Corporate and Entertainment Law and Litigation. Please comment below:

RE: STATUTORY OFFER

Having a frivolous lawsuit filed against you can be a fearful, expensive and time-consuming task. There are ways to combat a frivolous lawsuit with good research, time, and a solid response letter. This video explains how to defend a frivolous law suit by responding with a statutory offer letter. Additionally, an actual statutory response letter is in the article below.

The letter maps out the steps to take on how to defend a frivolous lawsuit as well as what claims to refute in the causes of action. The first step is a response to the attorney bringing the claim and it reads as follows:

Via Fax and Email

July 2, 2007

Glenn Manning
33 Central Avenue, Suite 50
Phoenix, Arizona 85012

RE: STATUTORY OFFER

Dear Glenn,

This letter will serve as an official statutory offer and will be introduced to the court at the outset of future legal proceedings, if necessary. After consulting with several attorneys eager to take this case, we have decided to write this statutory offer re-explaining the facts, the law, our future and the counter claims and actions with which we will take should this frivolous lawsuit proceed. We reserve the right to bring any and all claims with any and all parties listed within.

The lawsuit entitled Company, LLC vs. Me, et. al., (the “Lawsuit”) is completely unjustified and should this proceed you and your clients are being put on notice that we will pursue mandatory punitive sanctions and attorneys fees against your clients Company LLC (“Smith”), David Smith (“Smith”), an individual and Jerry Jones (“Jones”), an individual under ARS 12-349(c), ARS 12-347(a) and 44-2083. We will additionally immediately motion the court to have Glenn Manning, Esq. (“Manning”) removed from the case as a conflicted material witness and then add Manning to the case and seek sanctions under Rule 11 as well as ARS 12-349(c), ARS 12-347(a) and 44-2083 against Manning. We will additionally seek sanctions against Manning from the Arizona bar.

Under ARS 12-349 the court must grant attorneys fees and double damages when a Plaintiff and Attorney (1) brings or defends a claim without substantial justification; (2) brings or defends a claim solely or primarily for delay or harassment. For the following reasons this lawsuit will be subject to ARS 12-349(c), ARS 12-347(a), 44-2083 and Rule 11.

BREACH OF NON-COMPETE AGREEMENT

As you are well aware, we responded to Manning’s letter dated June 1, 2007 with a phone call to Manning where we specifically outlined why the allegations of breach of contract under the non-compete agreement against Quinton James (“James”) lacked a good faith basis. First, Our company, James, and I do not compete against Smith. In fact the reason we were forced to start another entity in order to fulfill our interests was primarily because Smith had no interest in what we were doing. Multiple times we attempted to get Smith, Smith and Jones to engage in projects we were interested in pursuing. Everytime they refused. I personally pulled Jones aside and begged him on multiple occasions to help me convince Smith that we should attempt some of these projects that we are currently working on now. Jones agreed to meet with Smith, however continually put off the meeting and after six weeks had gone by I had to take matters into my own hands. I approached Smith about the projects and asked Smith if Smith could commit only two hours a day to these projects, and Smith refused. Our company has no clients, Our company does not solicit clients and Our company is not seeking any clients. We would happily direct clients Smith way, it’s not our business. Therefore there is no competition.

Secondly, as stated in the conversation with Manning, the Non-Compete executed by James is unenforceable. Under Arizona law, a restrictive covenant will be considered unreasonable and unenforceable: "1) if the restraint is greater than necessary to protect the employer's legitimate interest; or 2) if that interest is outweighed by the hardship to the employee and the likely injury to the public." Valley Med. Specialists v. Farber, 982 P.2d 1277, 1281 (Ariz. 1999). Generally, non-competition restrictive covenants are either reasonable and enforceable or unreasonable and unenforceable. Moreover, Arizona courts rigorously scrutinize geographic and temporal restrictions, as they will enforce only those agreements in which the "restraint does not exceed that reasonably necessary to protect the employer's business, is not unreasonably restrictive of the rights of the employee, does not contravene public policy, and is reasonable as to time and space." Bed Mart, Inc. v. Kelley, 45 P.3d 1219, 1221 (Ariz. App. 2002); see also, Bryceland v. Northey, 772 P.2d 36, 40 (Ariz. App. 1989) (suggesting, in dicta, that a reasonable temporal restriction should not exceed 14 weeks); Amex Distrib. Co., Inc. v. Mascari, 724 P.2d 596, 604 (Ariz. App. 1986) (asserting, in dicta, that a period of a few months is probably the maximum appropriate temporal restriction for a sales representative).

The agreement signed by James and Smith specifically states that “the Employee shall not, anywhere in the United States or any other country” work anywhere in the field of the internet. This restriction (1) does not protect a legitimate employer’s business interest, (2) is extremely restrictive of the rights of the employee, (3) contravenes public policy and (4) is completely unreasonable to time and space. As seen in the case law above, and the facts, we don’t compete with Smith, therefore there is no legitimate interest, James’s career is 100% based on the internet and therefore his rights would be severely restricted and public policy would be contravened. Additionally, courts do not enforce agreements longer than 14 weeks in Arizona and deny restrictive covenants that have an entire state restriction let alone an entire world restriction. Therefore the breach of contract claim against James is without a good faith basis, frivolous and brought with an attempt to delay and harass.

BREACH OF FIDUCIARY DUTY

The Breach of Fiduciary Duty Claim brought against Marvin Jones (“Jones”) is also completely frivolous, without a good faith basis, and brought with an attempt to delay and harass. I am not a licensed Arizona attorney. I was not completely uprooted from my home in Los Angeles California to perform legal services in Arizona for Smith. I can’t be Smith’ attorney and never had any intention of taking the bar in Arizona. As stated above, we attempted on numerous occasions to get Smith, Smith and Jones to engage in the projects that we are engaging in now and that is what I came to Arizona to do. Smith, Smith and Jones refused. I was never paid from any of my work at Smith, which will be explained in detail below. After a year of work in which I was never paid a dollar from Smith, despite promises of being paid by Smith, Smith and Jones, I found myself facing an eviction from my condo.

I turned to my “friends” and “partners” Smith and Jones seeking some form of payment for my services and instead of finally paying me for my services, Smith and Jones offered to buy my interest out of Smith while I was under extreme duress in the amount equal to what was owed to prevent me from being evicted from my condo. This of course is a separate action in itself and the amount is precisely identical to what was owed to stop the eviction process. I had no choice but to accept the offer or become homeless. Shortly, after the buyout, James and I founded Our company to engage in the work that Smith, Jones and Smith had refused to do. To prove a claim for breach of fiduciary duty, the plaintiff must prove that: (1) the defendant had a fiduciary duty to the plaintiff; (2) the defendant breached the duty and (3) the breach of duty caused injury to the plaintiff. There was no duty to the Plaintiff that never paid me, refused to engage in the business endeavors I wanted to pursue and who was forced out under extreme duress. Additionally, there is no injury to Plaintiff because we don’t compete and attempted to get Plaintiff to engage in this activity however Plaintiff refused. Additionally, there is no injury to Plaintiff because Our company does not have clients and does not seek clients. Again, this claim is frivolous, without good faith basis, and brought with an attempt to delay and harass.

TORTIOUS INTERFERENCE WITH BUSINESS RELATIONS

The Intentional Interference with Business Relationships claim is also frivolous, lacks a good faith basis and brought with an attempt to delay and harass. To establish a prima facie claim for tortious interference with contract, a plaintiff must show "the existence of a valid contractual relationship or business expectancy; the interferer's knowledge of the relationship or expectancy; intentional interference inducing or causing a breach or termination of the relationship or expectancy; and resultant damage to the party whose relationship or expectancy has been disrupted." Wallace v. Casa Grande Union High Sch. Dist. No. 82 Bd. of Governors, 184 Ariz. 419, 427, 909 P.2d 486, 494 (App. 1995). The interference must be "improper" before liability will attach. Bar J Bar Cattle Co. v. Pace, 158 Ariz. 481, 483, 763 P.2d 545, 547 (App. 1988). And, "a competitor does not act improperly if his purpose at least in part is to advance his own economic interests." Id. at 485, 763 P.2d at 549; see also Restatement (Second) of Torts § 768 (1979). "The need for caution [in finding liability] is doubly required where the effect of the actor's interference is only to cause the cancellation of a terminable contract." Bar J Bar Cattle Co., 158 Ariz. at 483, 763 P.2d at 547.

As stated above, we don’t seek clients nor do we have any clients. We don’t speak with Smith clients and would have no interest in them. We don’t interfere with Smith business however we are focused on our own business which is unique and separate from Smith. Therefore, this claim is without a good faith basis, frivolous and brought with an attempt to delay or harass. Additionally, as seen in the case law above if we did interfere with Smith, Smith must show damage, Smith must show an improper means, Smith must show more than advancing our economic interest and Smith must show more than just the mere cancellation of a contract. Smith can do none of the above, because Our company has no clients, does not seek clients and in fact will turn down clients to pursue our own interests.

REMOVAL OF GLENN MANNING AND SANCTIONS

We will immediately remove Manning from this case and add Manning as a Defendant in the cross complaint. Manning is a material witness in this case. Manning is well aware of my relationship with the Plaintiff, Smith, Jones, and Claire Jones. I have worked with Manning in various business and legal interests concerning all of the parties. Additionally, Manning is aware and has been made aware of the laws concerning the causes of action brought without a good faith basis and Manning has continued to pursue them regardless of Manning’s ethical obligations.

COUNTERCLAIMS AGAINST PLAINTIFF, SMITH, JONES, MANNING

I will bring the following claims against Company LLC, all of the real estate companies, David Smith, Claire Jones and Jerry Jones Jr. for (1) Unpaid Wages under ARS 23-355 where I will seek treble damages, (2) Promissory Estoppel, (3) Unjust Enrichment, (4) Fraud, (5) Breach of Contract; (6) Intentional Interference with Business Relationships; (7) Breach of the Covenant of Good Faith and Fair Dealing; (8) Fraudulent Transactions Against a Merchant Account; and (9) Malicious Prosecution. Additionally, I have had discussions with the Scottsdale Police Department regarding the fraudulent transactions against a merchant account and I will pursue these criminal charges.

The unpaid wages claim under ARS 23-355, also supported by promissory estoppel, unjust enrichment and breach of contract will be made on the basis that when I moved out here and completely uprooted myself with the promise made by Smith and Smith that I would receive five thousand dollars per month from Smith and an additional five thousand dollars per month from Greg Jacobs. I worked for an entire year extremely long hours only to hear that there was no money to be paid at the time. I never agreed to forgo any of those payments. This claim is further supported by Promissory Estoppel and Unjust Enrichment in that I worked 50 hours a week for Search Toppers, David Smith as an individual and Jerry Jones Jr., as an individual. Additionally, at the direction of Smith, I performed services for Claire Jones, Company LLC and others as well as at the direction of Jones, I performed services for Lynne Jackson, Kahkuyan Kent, Josh Beck and others. For all this hard work, I was never paid from Smith, Smith or Jones. Promissory Estoppel is a strong claim supported by the fact that I was induced to completely leave everything behind in Los Angeles and come to Arizona by Plaintiff, Smith and Jones. I detrimentally relied on the inducement and moved to Arizona working extremely hard for Plaintiff, Smith and Jones and the court must now correct this injustice.

The fraud claim will be made based on the fact that I was never paid anything from the companies and two individuals that I dedicated my life to because I was told that the companies were never making any money however after I leave all of a sudden Smith is losing money because of interference with relationships. The Fraudulent Transactions Against a Merchant Account claim will be made against David Smith personally for his nearly $10,000 worth of charges against my new company’s merchant account to purchase merchandise from a company that is owned collectively by David’s wife, Claire Jones, David’s brother in law, Jerry Jones, Andrew McAdams and myself. The malicious prosecution charge will be brought against Smith, David Smith, Jerry Jones, and Glenn Manning for bringing this unjustified lawsuit.

In addition to my causes of action, several of the individuals listed below will serve as material witnesses and will additionally join the lawsuit as parties against Smith, Jones and Smith and other entities for unpaid wages, breach of contract, promissory estoppel, unjust enrichment, and fraud.

WITNESSESS AND DEPOSITIONS

The following people will be deposed and presented with interrogatories as material witnesses and I am sure several could testify with information unaware to me of the fraudulent transactions by the Plaintiffs. The witnesses will include but are not limited to: David Smith, Jerry Jones, Claire Jones, Glenn Manning, Andrew, Jeanette, Sarah, Gary Simmonds, Mike West, Sonny Lee, Eric Wnuck, Josh Campos, Kahkuyan Brewer, Alex Kandah, Ken, Michelle, Steve, Vannessa (deed and note drafted for her) and several others. I am also sure some of the individuals listed above may have some outstanding claims, which I will assist with, against the Plaintiff, Smith and Jones as well as some of their other entities as well as Smith.

When James and I first departed from Smith, Smith contacted us with an attempt to become involved with what we were doing after seeing the quality products that we created. Products, that he had no interest in when we first described them to him. Once he realized that we were not interested in allowing him to control or obscure our business vision in any way, however we did not close the idea of potentially working together in the future, Smith, Jones and Plaintiff have elected to bring this lawsuit. I have seen this mentality when dealing with Smith throughout the past year, but I have exercised and maintained strong legal ethics in advising him not to bring lawsuits with an attempt to harass. We don’t fault Smith as it is in his personality and fabric to engage in this behavior. We are surprised that Jones has joined in this lawsuit, however we do not blame him as well because he only knows what he hears from Smith. We actually would still entertain working with Jones and Smith should the right deal come about.

The statutory offer is in the amount of twenty $20.00 for the full dismissal of all claims with prejudice against all Defendants. Simple, review of case law from Arizona or any state and / or a discussion with any attorney will explain in crystal clear clarity that there is no good faith basis for these claims and this lawsuit is frivolous. There are several cases directly on point for each claim, in which Plaintiff has denied the Defendant, is considerably more financed than Defendant and brings the same causes of action with analogous facts. The disposition of these cases is full dismissal with prejudice as well as double damages, attorney’s fees, sanctions and the continuation of the Defendants’ counter claims. Should this lawsuit proceed we will be forced to bring the above listed counter claims which we will pursue even after the frivolous claims have been dismissed. All we want to do is pursue the business interests that Smith, Smith and Jones had no interest in pursuing.

Please be advised that if this offer is not accepted with seven days, we will be forced to retain one of the law firms who have assisted with this letter and file our answer and counterclaim and pursue our claims to the fullest extent of the law. I look forward to your response by 5pm, July 10, 2007. We reserve the right to assess our position upon being contacted regarding this offer. Additionally, as a professional courtesy and in order to give you sufficient time to think about the interests of this letter we respectfully ask for a 60 day extension to file the answer, should that be necessary.

Best Regards,

Marvin Jones

MarvQuin sent the official letter above to a former partner who has attempted to distract MarvQuin with a frivolous lawsuit. MarvQuin decided to post the letter to inform others how to appropriately deal with the situation and keep you informed as to the progress of the situation. The letter contains a very accurate and detailed account of the transgressions as well as Arizona Law on Non-Compete, Fiduciary Duty and Tortious Interference.

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